Markets Price in Higher Odds of September Fed Rate Hike as Oil Tops $100
Cue Writer
Investors are placing higher odds on a September interest-rate increase by the Federal Reserve after oil prices climbed to $100 a barrel and new labor data pointed to continued strength in the U.S. economy, according to CNBC.
Fed funds futures showed roughly an 82% chance of a rate increase at the central bank’s September meeting as of Thursday, CNBC reported, compared with less than 53% a week earlier. The market still largely expected policymakers to leave the federal funds rate unchanged at their meeting next week.
The shift followed a jump in Brent crude, the global oil benchmark, to $100 a barrel amid an escalation of fighting involving the United States and Iran. Higher energy costs can feed into inflation, a central concern for the Fed when setting borrowing costs.
Labor-market data added to the debate. Initial U.S. jobless claims fell to 187,000 for the week ended July 18, the Labor Department reported — the lowest reading since 1969, according to CNBC. A resilient jobs market can give policymakers more room to focus on inflation risks.
Higher rate expectations also weighed on stocks and pushed Treasury yields higher, CNBC reported. For consumers and businesses in the U.S. Virgin Islands, the outlook matters because changes in U.S. borrowing costs can affect credit-card rates, auto loans, mortgages and the cost of financing investment.
The futures market is not a forecast from the Fed, and economists surveyed by FactSet still did not expect the central bank to raise rates this year, CNBC said. The next policy meetings and the path of energy prices will help determine whether the market’s expectations hold.
Source: CNBC